The Genesis Revelation - 11 March, 2014 The Smoking Tire

[scottdk]

http://www.thesmokingtire.com/2014/the-genesis-revelation/

Read more by clicking the link. I think there are some pretty accurate points. Image is a problem without a luxury brand. What do you think?

Two years ago, Hyundai pulled an even higher card out of its sleeve when it introduced the Equus. This was a Korean car, a Hyundai, that was meant to take aim at cars like the Lexus LS and Audi A8. Once again: it’s still a Hyundai. It comes with every qualification and every feature that the other models do, except for one. That is a fancy badge with brand cache to carry it to that desired status. It, however, is also half the price of its competitors. It is truly a car that represents value and substance over flash and recognition. It doesn’t just stomp on the phrase “only a Hyundai”, it obliterates it.
However, the market has been more than slow to respond. For reference, in its first full year on the market in the US, Lexus sold 42,806 LS400s. It was such a successful launch that 5 months after it hit the market, it had surpassed The Mercedes S-Class and BMW 7-Series for sales. Alternatively in 2011, its first full year in the US market, Hyundai found homes for 3,193 Equus’. That’s a number that all of its competitors managed to at least double, in most cases triple. The launch of the Equus can only be likened to one other automotive fumble, the Volkswagen Phaeton. The Phaeton was another great luxury car handicapped by its “everyman marquee” to only be able to move 1,433 units its first year in the States. It was pulled out of America after just 3 years of disappointing results.

 

[NSXNEXT]

Luxury brand = higher prices.
I'm totally fine without a luxury brand.
My RSpec is a sleeper from both a luxury and performance perspective.

 

[larry'sown]

There are no good points in that article. This topic has been beaten to death. It costs money to launch a luxury brand and the consumers will foot the bill with inflated prices. Comparing the launch of the LS to the Equus has to be one of the most asinine comparisons I've seen yet. The industry has changed so much in the last 25 years. How is the LS selling in comparison to the S-Class and 7 Series now? Also, surprise; yet another comparison to the Phaeton! I didn't see that coming The Phaeton failed because it's price tag was almost as much as its corporate sibling the A8, which didn't sell well either. It was doomed to fail. The Equus has carved out a nice little niche. Despite what so-called experts print, it sells well in relation to cars like the Jaguar XJ, Porsche Panamera and Audi A8.

 

[ShadowZ]

Hyundai has the money to build a luxury brand from the ground up and keep the cost to consumer relatively low. After all, Hyundai builds ships too and other stuff too. Nearly $100Billion a year in total.

 

[GenesisCaptain]

This article is massively flawed. The writer did not research very well.

Back in the mid-90s, the Lexus LS 400 was not a competitor to the 7 Series or S Class. (Lexus might have wanted it to be, but it was not.) The 1st Generation LS 400 was more akin to the BMW 5 Series and BMW E Class. It was substantially smaller and lighter than the top tier Euro cars. It compared in all specs, including price, against the mid-size Euros. And, its sales numbers should be compared accordingly. Lexus did not produce a direct competitor to the BMW 7 and MB S until the 2007 model year LS 460. So, they sat in the marketplace for over a decade before they truly took on the big boys. Until then, it was just marketing spin.

Equus took on the big boys from day 1.

The other bit of history totally missed is that the Phaeton was a total ponderous pig. It was 600 lbs. heavier than a BMW 7 and 1,000 lbs. heavier than the MB S. It was a very nice pig, but it was a pig. Many of the reviews at the time commented on VW's efforts to attempt to build its first big car and wondered why they did not tap into Audi's experience. It was loaded with tech, but its performance was severely lacking. My hunch is it might have survived the VW everyman brand if it could perform. But, it was like driving a yacht. Just for a quick frame of reference, BMW's Rolls Royce Phantom only weighed 400 lbs. more than the VW, but it massively out-handled it.

Unfortunately, the Equus shares the handling issues with the Phaeton, and the writer totally misses that.

 

[Mark_888]

Hyundai has the money to build a luxury brand from the ground up and keep the cost to consumer relatively low. After all, Hyundai builds ships too and other stuff too. Nearly $100Billion a year in total.

I think the Hyundai Automotive Group is a separate company now:

"The company spun off many of its better known businesses after the 1997 Asian financial crisis, including Hyundai Automotive Group, Hyundai Department Store Group, and Hyundai Heavy Industries Group.

The Hyundai Group now focuses on elevators, container services, and tourism to Mount Kumgang. As of March 2007, Hyundai Engineering and Construction is the main shareholder of Hyundai Merchant Marine, which is the de facto holding company of Hyundai Group."


"Before restructuring (beginning circa 2000), Hyundai's major areas of activity included shipbuilding, car manufacture, construction, retailing, finance, and electronics. After founder Chung Ju-yung's death in 2001, the component companies of Hyundai were split off into separate companies."​

 

[YEH]

This article is massively flawed. The writer did not research very well.

Back in the mid-90s, the Lexus LS 400 was not a competitor to the 7 Series or S Class. (Lexus might have wanted it to be, but it was not.) The 1st Generation LS 400 was more akin to the BMW 5 Series and BMW E Class. It was substantially smaller and lighter than the top tier Euro cars. It compared in all specs, including price, against the mid-size Euros. And, its sales numbers should be compared accordingly. Lexus did not produce a direct competitor to the BMW 7 and MB S until the 2007 model year LS 460. So, they sat in the marketplace for over a decade before they truly took on the big boys. Until then, it was just marketing spin.

Equus took on the big boys from day 1.

The other bit of history totally missed is that the Phaeton was a total ponderous pig. It was 600 lbs. heavier than a BMW 7 and 1,000 lbs. heavier than the MB S. It was a very nice pig, but it was a pig. Many of the reviews at the time commented on VW's efforts to attempt to build its first big car and wondered why they did not tap into Audi's experience. It was loaded with tech, but its performance was severely lacking. My hunch is it might have survived the VW everyman brand if it could perform. But, it was like driving a yacht. Just for a quick frame of reference, BMW's Rolls Royce Phantom only weighed 400 lbs. more than the VW, but it massively out-handled it.

Also, the LS400 upon launch was priced not only well below the S Class, but below a loaded E Class with a starting MSRP of $35k.

The price of the LS has risen over the years (but still $22k less than the S Class) and sales have fallen (the LS460 doesn't come anywhere close to 30k a year in sales).

The problem w/ the Phaeton was not only its pricing (was priced way too close to the A8), it looked like an oversized Passat and VW offered nothing in the way of added service.

VW, however, is planning on bringing back the Phaeton to the US market, but this time at a lower pricepoint.

As for the poundage of the Phaeton, it was built on the same platform as the Bentley Continental.

The Equus upon US launch was already dated and was lacking in certain areas (esp. with regard to the quality of materials on the dash and center stack), but it was developed for the Korean market (hence, the dash getting the short-shrift on materials whereas the rear passenger controls had the luxury touch) - which is why it rides like an old school luxo-cruiser.

Nonetheless, even w/o a lux badge, sales of the Equus are not that far off from the A8 and XJ and they both are offered in AWD.

H/K should sell around 8k Equus and K900 sedans - which isn't bad for an out of date platform w/o AWD.

The current Genesis outsells the GS and M and the new one (with AWD) will only further the sales gap.

It's a bit tougher to sell w/o a lux badge in the flagship segment, but H/K at around 8k in sales will be quite respectable and sales will only increase with the next gen models w/ an up to date platform and available AWD.

 

[sluggo]

I understand the need for and the arguments against a luxury brand for Hyundai. What I don't understand is the need for two brands (Hyundai and Kin) that sell essentially the same cars through nearly their entire lines. Is this simply a "shelf-space" strategy (like Proctor&Gamble soaps)? Or is it a GM-style Chevy/Buick/Olds strategy where one line is considered to be a slight step up, even though the underlying car is identical.

 

[NSXNEXT]

I understand the need for and the arguments against a luxury brand for Hyundai. What I don't understand is the need for two brands (Hyundai and Kin) that sell essentially the same cars through nearly their entire lines. Is this simply a "shelf-space" strategy (like Proctor&Gamble soaps)? Or is it a GM-style Chevy/Buick/Olds strategy where one line is considered to be a slight step up, even though the underlying car is identical.

And we all know what happened to Oldsmobile and Pontiac.

 

[Mark_888]

I understand the need for and the arguments against a luxury brand for Hyundai. What I don't understand is the need for two brands (Hyundai and Kin) that sell essentially the same cars through nearly their entire lines. Is this simply a "shelf-space" strategy (like Proctor&Gamble soaps)? Or is it a GM-style Chevy/Buick/Olds strategy where one line is considered to be a slight step up, even though the underlying car is identical.

As of July 2, 2011, Hyundai Automotive Group only owns 32.8% of Kia Motors. Hyundai and Kia operate as separate companies, although they have a technology sharing agreement. The GM brands you mentioned above are all 100% owned by GM.

GM and Toyota once made two versions of the basic same car in Freemont CA, but they are separate companies. Chrysler makes the Volkswagen Routan. At one time, Isuzu made the Honda Pilot. There are many other examples.

BTW, the 2009-2011 Genesis V6 used a Aisin 6-speed transmission. Aisin-Warner was a joint venture of Toyota and Borg-Warner to make transmissions for RWD cars like on some Lexus models. Aisin-Warner is now part of Aisin Seiki Co, so Toyota ownership has dropped from 49% to about 30%.

The car business is a lot more complicated these days, and many major parts and components are outsourced or made via joint ventures. No one makes all their parts from scratch anymore.

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[GenesisCaptain]

Also, the LS400 upon launch was priced not only well below the S Class, but below a loaded E Class with a starting MSRP of $35k.

I thought the LS400 MSRP was pretty similar to the BMW 540i and MB E420 back in 1995-- right around $50K? Granted, once you optioned-up the BMW and MB, they would be pushing high $50s, but not too far out of line.

I had a 1995 Acura Legend and my Dad had a prior generation 535i, and that is roughly my memory of the Legend and where those other three were positioned. The Legend was smaller, a V6, and massively cheaper than the LS, 5 V8, and E V8.

 

[YEH]

I understand the need for and the arguments against a luxury brand for Hyundai. What I don't understand is the need for two brands (Hyundai and Kin) that sell essentially the same cars through nearly their entire lines. Is this simply a "shelf-space" strategy (like Proctor&Gamble soaps)? Or is it a GM-style Chevy/Buick/Olds strategy where one line is considered to be a slight step up, even though the underlying car is identical.

What H and K are doing is platform sharing (don't share any sheetmetal or interior design) and not badge engineering as what the old GM did (as did Ford with Mercury and Lincoln).

Not only that, H and K don't share infotainment/telematics systems, as well as AWD systems.

What H and K are doing is akin to what Ford and Mazda did when Ford owned about a third of Mazda - sharing platforms and powertrains.

These days, Nissan, Samsung-Renault and Renault are increasingly sharing platforms and powertrains (Nissan and Samsung-Renault compete in Korea and Nissan and Renault in Europe).

Even auto-makers w/ no shared owner-ship interests are sharing platforms and powertrains (see Nissan and Mercedes, Toyota and BMW or Mazda and Fiat).

And that's the thing that concerns me about H and K - while they have each other, Hyundai has stubbornly tried to do everything on its own (from hybrids to diesels to LNG to hydrogen fuel cell) when even the largest automaker, Toyota, has numerous partners (there was the GEMA engine joint venture w/ Mitsu and Chrsyler/Daimler but that was years ago).

Hyundai purportedly turned down an offer from Daimler regarding sharing powerplants, with Daimler eventually partnering up with Nissan.

Getting a Mercedes sourced diesel powerplants would have been beneficial for Hyundai in launching the 2G Genesis and 3G Equus for the European market, not to mention the RK compact sedan and the new coupe (Toyota is sourcing diesel engines from BMW for Lexus).

I thought the LS400 MSRP was pretty similar to the BMW 540i and MB E420 back in 1995-- right around $50K? Granted, once you optioned-up the BMW and MB, they would be pushing high $50s, but not too far out of line.

The LS400 was launched w/ a ridiculously low MSRP of $35k.

That's why the Germans accused Toyota of selling the LS400 originally at a loss.

Even if Toyota didn't do that, they were at the very least subsidizing Lexus dealerships to keep them afloat.

 

[GenesisCaptain]

The LS400 was launched w/ a ridiculously low MSRP of $35k.

Are you sure about that? Do you have a citation?

I just don't remember the LS400 ever being cheaper than the Acura Legend. The Legend was around $40K. I remember the LS400 being substantially more than the Legend-- as it should have been. It was larger with a V8.

Edit: Partial Never Mind. My comments re pricing were about the 2nd generation LS. The first gen was way cheaper. Though not substantially cheaper than its 5 Series and MB contemporaries.

 

[Mark_888]

Are you sure about that? Do you have a citation?

I just don't remember the LS400 ever being cheaper than the Acura Legend. The Legend was around $40K. I remember the LS400 being substantially more than the Legend-- as it should have been. It was larger with a V8.

Don't we need some dates here? The Acura Legend first appeared in 1986. I believe the first LS400 was 1989. According to Wikipedia "The LS 400 debuted at US$38,000 in the U.S." By 1995, Lexus had achieved good market share and no longer had to take a loss on the cars.

 

[ComputerBudda]

Naw, don't let facts get in the way of a good discussion.

 

[mikec]

Remember that Hyundai didn't even plan to sell the Equus in the US initially. It was designed for the home market as a chauffeur driven machine. Hyundai decided to show it at major US auto shows just to get reactions, and to have another luxury car on display with the Genesis, to show the Genesis wasn't a one-off fluke from the company most folks knew as the Elantra maker. The Equus garnered enough positive feedback that they decided to bring it to the US market after all. It wasn't hard to do - "Federalizing" the Equus - since it shares so much with the Genesis. If I remember correctly, when Hyundai announced the Equus would be coming to the US, their expected goal was about 3000 sales per year. They never expected to overwhelm the market.

mike c.

 

[YEH]

Are you sure about that? Do you have a citation?

I just don't remember the LS400 ever being cheaper than the Acura Legend. The Legend was around $40K. I remember the LS400 being substantially more than the Legend-- as it should have been. It was larger with a V8.

Edit: Partial Never Mind. My comments re pricing were about the 2nd generation LS. The first gen was way cheaper. Though not substantially cheaper than its 5 Series and MB contemporaries.

From an Auto News article on Acura's Bargain Birth.

The 1986 Legend started at $19,543, including shipping, but that was with a manual transmission and cloth seats. That was more than twice the price of Honda's Accord. Still, from the opening weekend, Acura showrooms were crowded.

"People were ready for it," Wright said. "They wanted to move up a little bit, but didn't want the pricing jump of the Germans, Cadillac and Lincoln." At the time, BMW's 5-series offerings were straddling $30,000, depending on the model, and Mercedes' mid-range E-class models were pushing $40,000.

People forget that it took some time for BMW to approach pricing parity w/ MB (for the midsize sedan segment, the 7 Series is still a good bit cheaper than the S Class).

Don't we need some dates here? The Acura Legend first appeared in 1986. I believe the first LS400 was 1989. According to Wikipedia "The LS 400 debuted at US$38,000 in the U.S." By 1995, Lexus had achieved good market share and no longer had to take a loss on the cars.

Wiki is wrong.

http://www.caranddriver.com/features/1990-10best-cars-1990-lexus-ls400-page-7

Interesting that the Q45 had a higher base price of $38k.

 

[Mark_888]

Wiki is wrong.

It was introduced in 1989 as a 1990 model. As far as price, there are plenty of things to account for the $3K difference in price. Back in those days, many Japanese cars were sold at least MSRP and often higher, and base models were often not actually available even if they theoretically existed.

 

[SR22pilot]

I had a 1993 Q45. The 1994 had just come out with the new grill. I looked at the Lexus but by then the actual selling prices were very different with the LS at about $50K but the demo (6K miles) Q45 around $33K if I remember correctly. I loved that car. One reason I got the Genesis was to get back to V8 torque.

 

[YEH]

It was introduced in 1989 as a 1990 model. As far as price, there are plenty of things to account for the $3K difference in price. Back in those days, many Japanese cars were sold at least MSRP and often higher, and base models were often not actually available even if they theoretically existed.

Still doesn't change the fact that the original MSRP on the LS400 was $35k.

There are owners who still have their original sales sticker for $35k.

(I mean, really, who do you always have to try to take issue w/ things?).